The Boston Beer Company Annual Report 2016 Dear Shareholders

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The Boston Beer Company Annual Report 2016 Dear Shareholders THE BOSTON BEER COMPANY ANNUAL REPORT 2016 DEAR SHAREHOLDERS IN 2016, THE NUMBER OF INDEPENDENT BREWERS PASSED THE 5,000 THRESHOLD FOR THE FIRST TIME IN HISTORY. AS WE HAVE SAID OFTEN, THIS IS THE GREATEST TIME EVER TO BE A BEER LOVER. IT’S ALSO THE MOST COMPETITIVE TIME TO BE A BREWER AS THE SIZE AND STRUCTURE OF THE BEER INDUSTRY CONTINUE TO CHANGE. The top ten craft brewers, including Samuel Adams, account for more than a third of total craft beer sold and the next 120 account for another 35% of the U.S. craft beer market. Approximately 20% of craft beer brewed in the U.S. is made by much smaller breweries and tap rooms with hyper-local distribution. While few if any of these brands will achieve broad distribution, they are brewing good beer, and they are relevant in their own cities and towns. At the other end of the size spectrum, we see the world’s biggest foreign-owned brewers continuing to buy small, American craft brewers, removing their independent craft ownership, and adding them to their enormous global portfolios of brands. These changes in the competitive landscape have impacted our growth rates in 2016. The good news is we have weathered challenging times before, and we have been successful in learning how to navigate choppy seas. First, we stay true to our mission: to create long term profitable growth by offering the highest quality products to the U.S. beer drinker. We have tripled our size since 2004, and we believe we can return to growth because we have the people, products, and passion to do it. Not all growth is about increased sales. In 2016 we challenged ourselves to work more effectively and efficiently. We have been growing internally with improved systems, building a new senior management team, and a continuing commitment to innovation. One of the cornerstones of Boston Beer since its inception has been: change is good! And in 2016, despite our challenges, lots of good changes happened. LEADERSHIP TEAM UPDATES Over the past fourteen months, we expanded and solidified a new senior leadership team. At the start of 2016 we welcomed our new Chief Financial Officer Frank Smalla, and Senior Vice President for Supply Chain Quincy Troupe. Later in the year, we expanded the leadership team to include our Chief Marketing Officer Jon Potter, and promoted Cheryl Fisher to Vice President Human Resources and Tara Heath to Vice President Legal and Deputy General Counsel. This invigorated team is working closely together, and has set ambitious goals while laying the foundation for long term growth for the company. We have already found ways to save money, opportunities to increase innovation, and strategies to achieve greater synergy internally. While the 2016 Annual Report focuses on 2016 events, we want to include an important announcement made in February 2017. After 22 years as part of the Boston Beer family, and 17 years as President and CEO, Martin Roper has informed the Board of Directors of his plans to retire in 2018. Boston Beer has grown eight fold during Martin’s tenure, and he deserves enormous credit for that growth. He has given us ample time to find a replacement, and in the meantime, we know he will continue to lead the Company until a successor is in place. SAMUEL ADAMS STANDS FOR INDEPENDENCE, THE OPTIMISM OF THE AMERICAN DREAM, AND A BETTER BEER FOR ALL U.S. BEER DRINKERS. A SNAPSHOT OUR FAMILY OF 2016 OF BEVERAGES A very visible endeavor in 2016 was a complete redesign of our Another constant at Boston Beer is our boundless curiosity. We Samuel Adams identity and packaging to reflect a bolder, patriotic maintain our leadership position by exploring, innovating, and look. The process took us back to square one, to the day that we first leading the charge for new beers and other beverages. chose to name our beer after Samuel Adams. Samuel was a rabble- rousing patriot who doggedly fought for independence and played a Among the “Better Beer” category – which includes craft beer, crucial role in the American Revolution. We’ve prominently displayed imported beers, and craft-like domestic specialties from the big an image of the iconic statue of Samuel Adams at Boston’s historic global brewers – Samuel Adams is still one of America’s leading Faneuil Hall, which is located just down the road from our brewery. craft beers. In the cider category, Angry Orchard is maintaining its To us, the star represents colonial America, and we positioned our enviable 60% share of all cider, despite softness in the category. perfect pint glass in the center to reflect that we’re putting great Twisted Tea continues to grow at an impressive double digit rate, beer at the heart of America. We are proud to represent and celebrate and we have a leading share of the hard iced tea niche. what Samuel Adams stands for: passion, commitment, authenticity, and, yes, beer. Our craft beer incubator, A&S Brewing, and its three local brands have continued to develop loyalty in their regions. A&S has been In addition to new styles of Samuel led for five years by entrepreneurial visionary Alan Newman who Adams, we also introduced a new brand completed his five-year commitment at the end of 2016 and to our Boston Beer portfolio: Truly Spiked departed for new adventures. We wish him well. & Sparkling, a hard sparkling water that’s refreshing, gluten free, and low in We have the fundamental building blocks for long term growth. calories, sugars and carbohydrates. Initial We lead several categories, and have excellent distribution and response has been positive, and we look high quality products. The American craft beer business is about forward to growing Truly in this nascent to enter a new phase. Success will accrue to those breweries that category in 2017. focus on innovation, strong management, and quality. The Boston Beer Company has faced challenges before and changed to address In our 33-year history, our core values have remained constant. We the opportunities. Today we are prepared again to respond to the are committed to careful financial management and to offering the changing dynamics in our industry. We thank you for your continued highest quality products. We abide by Jim’s “String Theory”, which support of our company and our beers. says that teamwork and creativity outperform abundant resources. We hire great people; we brew great beers, we provide first class training, and we strive to win. JIM KOCH MARTIN ROPER CheersCHAIRMAN ! PRESIDENT & CEO BY THE NUMBERS 1,505: TOTAL BBC EMPLOYEES BUILDING 209: NEW HIRES 205: DAYS OF INSTRUCTOR LED TRAINING CLASSES FOR BBC EMPLOYEES 125: CERTIFIED CICERONES AT BBC Culture 8 600 975 120 573 Boston Beer Company Total BuildingSKUs shipped from Bottles sold in BrandsONE day New SKUs added in 2016 Awards Won in 2016 brands in our family all Boston Beer Company at the Boston Brewery 150 Experimental batches Samuel Adams Utopias breweries in 2016 for the Big Hapi & Kosmic brewed in the Samuel won 19 awards, including Mother Funk Grand Cru Adams Nano Brewery a Bronze at the Beer release parties World Cup 600 4,248 1.9MM CIDER APPLE TOURS GIVEN SOCIAL MEDIA TREES PLANTED AT THE BOSTON USERS REACHED BUILDING AT THE ANGRY BREWERY IN THROUGH TRULY ORCHARD IN 2016. A RECORD SPIKED & SPAR- WALDEN, NY HIGH KLING’S POSTS $14.5MM 961% 43% 47% 2016LENT TO SMALL FOOD & BEVERAGE INCREASE IN INCREASE IN INCREASE IN Connections BUSINESS OWNERS NATIONALLY VIDEO VIEWS ANGRY ORCHARD TWISTED TEA’S SINCE 2008 AS PART OF BREWING ACROSS SAM MENTIONS REACH ON SOCIAL THE AMERICAN DREAM ADAMS SOCIAL ACROSS SOCIAL CHANNELS CHANNELS CHANNELS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number: 1-14092 THE BOSTON BEER COMPANY, INC. (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-3284048 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One Design Center Place, Suite 850, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 368-5000 (Registrant’s telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of each class Name of each exchange on which registered Class A Common Stock NYSE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark YES NO ••if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ••if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ••whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ••whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
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